Amendments to Construction Lien Law in New Jersey
Steven Nudelman. Esq
Article Title:
Amendments to Construction Lien Law in New Jersey
See TERMS OF REPRINT to the end of the article.
Article Description:
Based on a report issued by the New Jersey Law Revision
Commision, a revision to the Construction Lien Law was
signed by Governor Christie in January, 2011.
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Distribution Date and Time: 2011-07-25 10:15:00
Written By: Steven Nudelman, Esq
Copyright: 2011
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Amendments to Construction Lien Law in New Jersey
Copyright (c) 2011 Steven Nudelman, Esq
Greenbaum, Rowe, Smith & Davis LLP
http://www.GreenbaumLaw.com/
Woodbridge, NJ, February 16, 2011 - After 16 years, a much needed
revision to the New Jersey Construction Lien Law, N.J.S.A.
2A:44A-1 et seq. ("CLL"), was signed into law by Governor Chris
Christie on January 5, 2011. The impetus behind the amendments
was a report issued by the New Jersey Law Revision Commission in
March of 2009 identifying several key problems with the statute
as it was enacted in 1994. The amendments purport to clarify
various provisions of the statute and conform it to numerous
court decisions interpreting the CLL that have been issued during
the past 15 years.
The amendments, which take effect immediately, include several
significant changes which participants in the construction
process -- owners, contractors, subcontractors, and suppliers --
must understand:
1. New Timing for Residential Construction Liens. Residential
construction claimants must file a Notice of Unpaid Balance and
Right to File Lien ("NUB") within 60 days from when the
claimant last performed work or supplied materials. Within 10
days after filing the NUB, the claimant is required to serve a
demand for arbitration for the purpose of determining the amount
of the lien claim. This time may only be extended upon consent of
the parties and arbitrator. Within 10 days after the
arbitrator's determination is rendered, but within 120 days from
when the claimant last performed work or supplied materials, the
claimant must finally record the lien claim. The lien claim form
must be stamped with the date and time when it was received by
the county clerk in order for it to be served on the owner and
any other interested parties.
2. Multiple Liens Against the Same Residential Project. The new
law allows parties aggrieved by lien claims relating to the same
construction project to be joined in a single construction lien
arbitration proceeding. Moreover, the law requires that, if
possible, the same arbitrator determine all such claims, even if
joinder is not possible. Finally, arbitrator(s) must consider the
outcome of all previous proceedings relating to the same
construction project in rendering the arbitrator's
determination. The primary purpose of these requirements is to
avoid inconsistent arbitration awards.
3. New Forms. New statutory forms were created for the NUB, lien
claim and amended lien claim. Significantly, the new forms
clarify the manner in which the claimant calculates the amount of
the lien. There is also a standard form of affidavit that is now
used to summarily discharge lien claims which have been satisfied
and a standard form for the bond used to discharge a construction
lien claim.
4. New Definitions. Many definitions in the statute have been
clarified or added. These include:
a. "Residential Construction" - A construction project which
includes any residential units is deemed "residential" in
nature. Therefore, a claimant must follow the special statutory
requirements for residential construction projects.
b. Filing - The act of delivering a document to the County Clerk
and that document being marked by the Clerk with a date and time
stamp is now defined as "lodging for record." A claim that is
"lodged for record" is enforceable against parties with notice
of the document, even if it has not been "indexed." "Lodging
for record" is distinct from "indexing," a term indicating
when the clerk files or records the lien documents in a manner
that puts the entire world on "record notice" of the lien.
5. Liens on Fee Interest. In the event that a tenant causes
improvements to be made to real property, the leasehold interest
is subject to attachment by a lien claim. The fee interest (held
by the landlord) is only subject to a lien claim in a limited
number of situations: If, in writing, the landlord expressly
authorizes the construction and provides that the fee interest is
subject to a lien, or; if the landlord has paid or agreed to pay
the majority of the costs in writing, or; if the lease or
sublease, where the landlord was a party, provides that the fee
interest is subject to a lien for the improvement.
6. The Lien Fund. The lien fund is the "pool of money from which
one or more lien claims may be paid. The amount of the lien fund
shall not exceed the maximum amount for which an owner can be
liable." The recent amendments to the CLL illustrate how to
calculate the lien fund, thus ensuring than an owner will not pay
more than once for the same work.
7. Liens Against Common Elements. For claimants against a
community association, liens placed on common elements may not be
enforced by foreclosure and sale. The only remedy for such a lien
claimant is a court-ordered assessment against the unit owners.
8. Suppliers to Suppliers May Now File Liens. A supplier to a
supplier who falls within the first three tiers of the
contracting chain and has a written contract may now file a lien
under the amended law. In most cases, the supplier does not have
a formal contract, but rather a "delivery slip." Under the
amended statute, in order to support a lien claim, a delivery or
order slip must refer to the site or project and be signed by the
owner or its authorized agent.
9. Enforcement by Summary Action. New procedures and parameters
for enforcing a lien in Superior Court are spelled out in the
amendments to the CLL. Additionally, the claimant must now also
file a Notice of Lis Pendens once suit has commenced.
10. Residential Construction Liens and the Allocation of Partial
Payments. A residential lien claimant who receives a partial
payment must release a proportionate share of interest in the
property. Moreover, in the absence of an agreement stating
otherwise, if the encumbered property is divided into
subdivisions or tracts then the allocation of released interest
must be proportionate to each subdivision or tract.
11. Discharge of Liens by Owner. In situations where the lien
claim has been paid in full, the claimant has failed to discharge
the lien, and 13 months have passed since the date of the lien
claim, the owner need only file a discharge certification and an
affidavit to summarily discharge the lien without court
intervention. However, before doing so the aggrieved party must
notify the claimant by certified mail. Thereafter, if no written
objection disputing complete payment of the lien claim is
received in 90 days, the owner may proceed with the expedient
discharge procedure. In situations where the claimant has
forfeited its lien claim and neglected to discharge the lien upon
demand, an owner may file an order to show cause to have the lien
claim discharged.
Although the above amendments attempt to eliminate the
ambiguities that were contained in the original CLL, there are
still issues which are undecided or which were determined by
prior Court decisions but were not incorporated into the
amendments themselves.
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Stephen Nudelman, Esq. writes for Greenbaum, Rowe, Smith and Davis
LLP who, in 2010 celebrated its 96th year of building business in
New Jersey. The firm has over 100 attorneys in four main practice
departments, and 19 practice areas offering comprehensive legal
services, including construction litigation. The firm has offices
located in Woodbridge and Roseland, New Jersey. For more
information, visit the firm's web site at
http://www.greenbaumlaw.com
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